A database marketing is a systematic collection of relevant information about each customer/prospect. Database marketing can also be described as a technique where you use all the information available within the organization databases as well as any useful external information to either improve or enhance the marketing efforts or on the other hand evaluate new markets or the potential of new products, that you plan to launch. Database-marketing achieves this by extensive use of database-systems and database-related tools. In an effort to effectively target potential customers, many enterprises use database marketing to build models of their target demographic group, track down these groups and focus their advertising budgets on them in the hope that it will result in an improved return on investment (ROI) from their advertising expenses. One of the biggest challenges any sales enterprise faces is in finding potential customers for their products. Billions are spent each year on product marketing, though much of these expenditures are wasted through the use of inaccurate data and bad marketing decisions. Database marketing is therefore an attempt to solve the problem of financial resources wastages. The major problem faced by many organization is how to reduce the marketing cost. The option opened to organization is to obtain necessary information about the customers so as to reach them with appropriate information at an effective and efficient cost. The information to be kept by the organization can be divided into three:-
Historical data: The historical data reveal the direction of past transactions of the customers, this information includes the names, addresses, frequency of purchases, quantity of purchases as well as promptness in payment.
Predictive data: It identifies which groups or subgroups are more likely to respond to a specific offer. This can be done through statistical scoring, customers attributes (e.g. lifestyle, house type, past behaviour etc) are given scores which help to indicate their future behaviour.
Social related data: It includes some personal data of the customers such as date of birth, wedding anniversary, and other related socially related . information.
Database marketing is a medium and long-term commitment which facilitates the development of a dialogue and a relationship with each customer and prospect. It involves careful selection, collection and constant analysis of computerized customer records/data in addition to the prospects.
Importance of Database Marketing
The importance of database marketing are as listed below:
- Get to know your customers a lot better
- Evaluate your customers’ value
- Learn how to distinct between valuable customers and not that valuable ones
- Service your customers better
- Service target-markets for your marketing activities more carefully
- Evaluate diverse propensities indicators
- Calculate the potential of new markets / new target-groups/new products within your database
Merits of Database Marketing
The benefits of database marketing are :-
- Being more precise with one’s activities saves time and resources.
- Targeting your market-segment more precisely saves money.
- More precise targeting increases customer-satisfaction (providing the right information at the right time to the right customer). Increasing customer-satisfaction improves business-performance in the long run.
- Response-rates from direct-mailings will dramatically increase while returns will considerably decrease.
- Costly market researches can often be pulled down from internally available information.
How organization can Profit from Database-Marketing
Being more precise with one’s activities saves time and resources. Targeting your market-segment more precisely saves money.
More precise targeting increases customer-satisfaction (providing the right information at the right time to the right customer). Increasing customer-satisfaction improves business-performance in the long run.
Response-rates from direct-mailings will dramatically increase, returns will considerably decrease.
Costly market-researches can often be pulled down from internally available information.
List possible benefits of database marketing.
- Being more precise with one’s activities saves time and resources.
- Targeting your market segment more precisely saves money.
- More precise targeting increases customer satisfaction (providing the right information at the right time to the right customer). Increasing customer-satisfaction improves business performance in the long run.
- Response rates from direct-mailings will dramatically increase while returns will considerably decrease.
- Costly market researches can often be pulled down from internally available information.
The concept of Business to Business or industrial marketing is used to describe marketing activities targeted at all individuals and organisations that acquire products and services which are used in the production of other products and services. These products include capital goods (e.g. buildings, land and machines), operational products (e.g. accessory equipment, supplies, maintenance services), and output products (e.g. raw materials, components, production services). The justification for creating industrial marketing as a specific field of study in marketing derives from the awareness that the market behaviour, which affects the demand and purchases of industrial products and services, is generally quite different from that experienced in consumer markets. One of the distinctive differences between industrial and consumer markets is that the demand for industrial products is a derived demand, meaning that the magnitude of demand for these products varies with the demand for the finished products and services based on them. The purchasing process of industrial products is also relatively more complex, and may be divided into a number of stages taking place over time. The purchase decision making process usually involves many people who are drawn from different departments of the buying organisation, depending on the strategic importance of the products or services being purchased. In contrast to consumer markets, industrial products are funded with organisational resources. That is, the buyers of industrial products do not finance the purchase with their personal money, but rather use organisational funds for the purpose. Finally, it is assumed that members of the purchase decision making units (buying centre members) act rationally in the decision making process. That is, idiosyncratic considerations scarcely enter the decision making process. This implies that the decision makers must be provided with substantial “objective” information by vendors on the basis of which their decisions can be made.
Industrial Product Buyers
There are three groups of industrial product buyers which are targeted by the industrial marketers:-
The manufacturers: The manufacturing organization will always buy raw materials which are sometimes the final product of other organizations. In addition they buy other components as inputs for final goods. The uniqueness of the manufacturing outfits are: – they are most often geographically concentrated; they buy in large quantity, depending on the available capacity and market; Purchasing decisions are taken by a selected number of people (e.g. purchasing section, the production section or users, the quality assurance etc). Most times they buy directly from the sellers hence personal selling is usually emphasized
The intermediate customers: are channel members or resellers. They buy and sell to make profit. Some make changes to the products they sell (e.g. repackage them) Thus, an export company or a distributor is an intermediate customer whose purchase decisions are influenced by the demand of the customers that they serve.
The public/Government Institutions: such as schools, hospitals, prisons, the military and public offices constitute a major category of buyers of industrial products. The annual budgets of some public bodies in the developed countries can be a multiple of the expenditure of private sector organisations. The recent purchase of registration materials by independent National Electoral Commission (INEC) is a typical example of public institution purchases.
Public Sector Buying Decisions
Many different purchasing terms are used in public sector purchasing. In most countries, however, most public sector purchasing is through tenders. Three tendering procedures can be identified, each with a different level of publicity of the tender notice:
Open tendering, where the invitation to tender is given the widest publicity;
Selective tendering, where the invitation is restricted to a predetermined list of suppliers,
Private contracting, where the awarding authority contacts suppliers individually to make a tender.
Contracts may be awarded on the basis of the following criteria
Automatic tendering, where the contract is awarded on the basis of a predetermined criterion such as the lowest bid, or some other criterion either in isolation or in conjunction with price
Discretionary tendering, in which the contract is awarded to the bid that is assessed to be most advantageous to the buying authority. The criteria are not pre-determined.
Negotiated tendering, in which the awarding authority negotiates freely with the supplier.
Stages of Purchase Decision Process for Industrial Product
Conventionally, business purchase decisions are expected to go through a set of stages. Purchases in new task situations go through eight phases, the number of stages and the relative importance decreases in the case of the other purchase situations.
Stage 1: Anticipation or Recognition of a Problem (Need): In rational purchase situations, the purchase decision will be triggered by the buying organisation’s recognition of a need, problem or potential opportunity to gain new benefits m within the changing environment. The trigger may be either external (e.g. new information from a potential supplier), or internal (e.g. an awareness of declining efficiency due to outmoded technology). This is a phase in the purchase decision process during which the information a seller provides is critical since the buyer is m wide search for solutions to the problem identified. modified
Stage 2: Determination of the Characteristics and Quality of the Needed Items: Having acknowledged the problem, the next stage is to explore alternative solutions. It may be decided to solve the problem in a novel manner, i.e. exploring technical solutions unfamiliar with the buyer a new task situation. Alternatively, management may decide to find a modified/improved version of solutions with which they have been familiar rebuy situation. Questions such as “what application requirements must be emphasised” and “what performance specifications should be used in evaluating in coming proposal” receive attention at this stage. The department whose staff are the users of the product is prominent at this stage. Their suggestions receive serious attention. Prospective suppliers are therefore advised to examine the information needs of the users and provide them to enable users make the choices that favour their products.
Stage 3: Description of the Characteristics and Quality of the Needed Items: At this stage the description of items will be made either by a specified brand name, size, specific model and possibly the manufacturing. This is very important so that each supplier is actually quoting for the same item.
Stage 4: Search for and Qualification of Potential Sources: Having specified the characteristics that buyers should look for, the market is then scanned for the products that fit these characteristics and the quantities to buy. If a supplier has contributed information to the first phase, that supplier will be certainly consulted to advise the buyer on where to get the best products. If the supplier has the product in question within its product line, it is placed in a lucky position of influencing the choice decision. It may suggest . modifications to its own product to fit the specific needs of the buyer. It has been shown that such partnering relationship with a buyer is highly advantageous in new task situations.
Stage 5: Acquisition and Analysis of Proposals: At this stage, qualified sellers are contacted with a request to make product offerings that can address the buyer’s problem. In straight rebuy situations, the existing seller will be the only supplier that the buyer will contact. For modified rebuy situations, there will be the need to analyse incoming proposals carefully before a final decision is made. The analysis of proposals becomes even more elaborate in new task situations.
Stage 6: Evaluation of Proposals and Selection of Suppliers: The.decision-making unit carefully compares the various offers in terms of the criteria decided upon earlier. A few of the proposals are selected and the purchaser is authorised to initiate negotiations with the seller concerned. Where the differences between the proposals are not pronounced, personal taste and considerations indirectly enter the decision making process.
Stage 7: Selection of an Order Routine: Order is placed with the selected supplier and the delivery as well as payment conditions are specified. For some types of machines and equipment, the delivery may also include installation and training of users. Here again the users’ voice becomes very important since their evaluation is important in determining how successful the purchase has been.
Stage 8: Performance and Feedback Evaluation: This is the stage in which the performance of the product is matched against the expectations of the buyer in order to determine the gap, if any between them. As noted above, the evaluation of the users carries a heavy weight in the overall assessment of the performance of the seller.
Purchasing Roles for Industrial product
Purchasing managers are known to assume some common roles in a buying process. These roles are classified into six groups. Note also that each role discussed below can be perform by an individual within the organization or a committee/team within the organization or consultant engaged by he organization.
The initiator is one or group of individuals who becomes aware of a company problem and recognise that the problem can be solved via acquisition of a product or service.
The gatekeepers usually act as problem or product experts. They have information about a range of seller offerings. Other buying centre members therefore rely on their information for their assessment of prospective sellers’ offerings. Thus, by controlling information, and, by having access to decision-makers in the firm, the gatekeepers largely determine which sellers get the chance to supply.
Influencers have been described as those who have a say in whether a product or service is bought or not. The more critical a purchase is to a company’s business, the higher the number of influencers. Critically strategic purchases frequently entail high resource outlays and affect the task performance of several employees the heads of whom naturally “have a say” in the purchase decision making process.
The deciders make the actual purchase decision. That is, they say yes or no to what sellers offer. In less complex purchase situations, the decision-making responsibility may fall on one person. But where the purchase is complex, group decision may be required.
The purchaser the one who makes arrangements for the delivery of the goods. He is also often directly involved in negotiating the conditions under which the transactions will be made.
The users are those who actually make use of the products in normal working process.
You have learnt in this module the concept of political marketing. I am sure you with me that the concept of marketing is key to all human endeavour. Whatever you a doing, you must always have the interest of your audience at heart so that you can make a accepted impact on the audience which most of the time bring financial gain to you. Relationship marketing is another concept you have learnt. Marketing activities must go beyond selling of products. . It must make an attempt to establish a long term relationship with the customers. Have you received any message from a bank or any institution wishing a happy birthday or congratulating you for your wedding anniversary? Such organization is relating with you from the social angle. The effective way of implementing an effective relationship marketing is the availability of adequate databased of the customers. So you have also been exposed to the concept of databased marketing. Finally, industrial marketing was also explained as the interaction of a marketing organization to other organizations with the aim of selling the marketing organization products.