How to implement marketing strategies using database approaches Received (in revised form): 22nd September, 2003 Hoda McClymont is an associate lecturer at the University of Southern Queensland teaching in the fields of marketing research and consumer behaviour. She has worked in the private sector and for government agencies at local, state and federal levels. Her research interests include database marketing, health marketing and tourism. Graham Jocumsen is a senior lecturer in marketing at the University of Southern Queensland with extensive teaching, consulting and research experience in marketing strategy, marketing research, marketing management and small enterprise marketing. He held senior faculty management positions prior to 1990 before returning to mainstream academic pursuits. Abstract Available technology has been primarily responsible for the rapid expansion of use of database marketing by firms in Australia. This paper, using the literature and qualitative empirical data, has built and evaluated (using case study methodology) a conceptual framework for formally identifying and assessing the opportunities for using databases in implementing marketing strategies. It was found that databases could be used to implement marketing strategies associated with customer retention, customer reactivation, product/service-related and promotion-related marketing strategies. The way the database was used to implement these strategies and the extent of this usage depended, however, on factors such as the product type, channel intermediaries, firms’ operations, firm size and the sophistication of the firms’ marketing activities. INTRODUCTION 50 per cent of respondents planned to The use of customer databases to pursue increase investment in database segmentation and targeting strategies has development and management in 2002.7 provided opportunities to significantly The rapid expansion of service offerings improve marketing effectiveness and to demanding close customer interaction has reduce marketing costs.1 Consequently, further stimulated adoption of database the adoption of database marketing by marketing approaches.8 Furthermore, firms has increased rapidly in many many firms are now integrating database industries2,3 for a number of reasons.4 For marketing with web-based tools and example, over 87 per cent of Australian techniques,9 thus providing marketers Hoda McClymont Associate Lecturer, firms now make varying uses of databases with expanding opportunities to exploit University of Southern in implementing their marketing both interactivity and personalisation Queensland, Department of 5 Marketing & Tourism, strategies. Direct marketing advertising associated with their marketing efforts. Toowoomba, Queensland expenditure (of which use of database Researchers have been challenged to 4350, Australia. approaches are a part) exceeded keep pace with the widespread and rapid Tel: ϩ61 7 4631 1453; 6 Fax: ϩ61 7 4631 5597; Aus$16.46bn in 2001. A business survey adoption of database marketing in e-mail: [email protected] conducted in 2001 showed that close to practice, resulting in a relative paucity of ᭧ Henry Stewart Publications 1741-2447 (2003) Vol. 11, 2, 135–148 Database Marketing & Customer Strategy Management 135 McClymont and Jocumsen guidance material published in scholarly expert interviewees (three database marketing journals. Specifically, the marketing practitioners and two literature lacks a conceptual framework marketing consultants) to name Australian which links marketing strategies to firms (in Brisbane, Sydney and potential uses of database approaches. Melbourne) known to engage in database Hence, the aims of this paper are first to marketing. Sufficient firms were then develop a conceptual framework which approached to obtain a total of 11 firms shows how marketing strategies may be willing to participate in the research, a implemented using database marketing number deemed adequate for research of approaches and secondly to explore the this nature.16–20 extent and reasons for such usage, using A total of 13 interviews were the literature and exploratory case study conducted with members of the 11 research. selected firms drawn from a range of Definitions of database marketing vary industry types, channel types and head widely.10–14 For the purpose of this office locations (two interviews were research, database marketing is defined as conducted in three of the case firms). asystemthatreliesonavarietyof The cases were named after the industry information technology tools and large in which they operated. The case list volumes of historical and/or real-time, comprised consumer goods, fast food, up-to-date, comprehensive data about publishing 1, publishing 2, automobile, customers, inquiries, prospects and financial 1, financial 2, suspects to assist in developing and telecommunication, charity, photography implementing marketing strategies, with and art. In summary, the cases spanned a theultimateaimofdeveloping total of nine industries, comprising up to longstanding relationships of repeat four types of channel intermediaries, business with customers (National Centre offering goods or services as their for Database Marketing’sdefinition).15 primary product type and having head offices which were based either in Australia, the USA or Sweden. METHODOLOGY Appropriate steps to maintain validity The methodology chosen for this and reliability of this qualitative research research was exploratory and involved were used.21 For example, triangulation two stages. First, a comprehensive of sources22 was achieved by collecting literature search embracing both database documents from the firms interviewed marketing and mainstream marketing was (to verify their assertions), conducting conducted to identify feasible marketing field observations and asking respondents strategies which could utilise database to review an early draft of the interview marketing. The second stage involved transcripts in order to correct any case research which sought to investigate inaccuracies and misconceptions. Content the extent of usage and reasons for such analysis of the interview transcripts usage of database approaches in permitted exploration of reasons for Australian businesses in relation to the database marketing strategies. Further, identified marketing strategies from the reliability was achieved by using a case literature. The target population included study interview protocol which provided all firms in Australia which practised a standard set of questions that was asked database marketing. Absence of a list of at each interview. The interview protocol such firms led the authors to develop a opened with a broad question which ‘convenience’ target list by asking several asked respondents to provide the ‘story 136 Database Marketing & Customer Strategy Management Vol. 11, 2, 135–148 ᭧ Henry Stewart Publications 1741–2447 (2003) How to implement marketing strategies using database approaches Table 1: Marketing strategies which utilised database marketing, as cited in the literature Strategies Customer Customer Product/ Promotion: Promotion: Author retention reactivation service Prospecting Cross-selling Caroll29 Ί Mitchell and Boustani30 Ί Reichheld and Aspinall31 Ί Berman32 Ί McEwan33 Ί Morrall34 Ί Ί Keaveney35 Ί Ί Marvin36 Ί Ί Hughes37 Ί Ί Ί Finnegan38 Ί Reichheld39 Ί Campbell40 Ί Ί Ί Geller41 Ί Ί Hall, Press, Ganey and Hall42 Ί Hepworth43 Ί Ί Berry44 Ί Ί Howe45 Ί Ί Lynn46 Ί Oggenfuss47 Ί Oppermann48 Ί Ί O’Malley49 Ί Ί Crié50 Ί Kassing51 Ί Ί Total 11 10 4 6 6 of their experiences’ relating to Customer retention implementing marketing through their Customer retention utilising database databases. This question was followed by marketing is defined as building long-term more specific ones targeted at each business with customers through the marketing strategy to determine the gathering and storing of information on a extent of usage of database approaches database about customers’ characteristics, and underlying reasons for such usage. their purchasing patterns and satisfaction levels with purchases.52 Customer retention directly influences a firm’s RESULTS: LITERATURE profitability levels53 because it is more The literature revealed four major classes expensive to acquire a new customer than of marketing strategies that were pursued to retain an existing one.54 Furthermore, through the database: customer retention, the longer a customer remains with a customer reactivation, product/service firm, the more likely it is that the and promotion strategies23–28 as shown in organisation could increase its share of the Table 1. The frequencies with which customer’s expenditure and hence further each database marketing strategy was contribute to profitability.55 Nevertheless, cited are shown in Table 1. Customer many firms still spend a significant amount retention and reactivation were most of their marketing budgets on customer frequently cited. Each marketing strategy acquisition at the expense of customer which utilised database marketing retention.56 approaches as identified in the literature Current marketing literature will now be addressed in turn. emphasises that customer retention ᭧ Henry Stewart Publications 1741-2447 (2003) Vol. 11, 2, 135–148 Database Marketing & Customer Strategy Management 137 McClymont and Jocumsen Table 2: Ansoff’s product/service-market matrix and marketing strategies which may utilise database approaches Existing market New market Promotional strategies utilising database marketing Existing product(s)/service(s) Market penetration Market