The true test of the effectiveness of a database marketing program is in the additional profit it generates for the user, which itself is a measure of the database marketing strategy being used.

The development of an effective database marketing strategy, therefore, is a critical task – perhaps the most difficult task – in the database marketing planning process.

Process

Strategy development requires innovative and creative thinking, careful testing, monitoring and refinement.

Database marketing is not (or should not be) a series of independent events, rather it is a process.

I was reminded of this recently when a direct marketer of computer products announced its ‘customer loyalty’ program.

I called to register for the plan, and, in response to my question, was told that my membership card would be sent to me in ‘six to eight weeks’ (now passed, no card received.)

Genuine

This program promises ‘priority service,’ but, in my case at least, did not deliver it at a crucial time. This situation may also be indicative of the lack of a database marketing strategy.

The company’s enthusiasm for database marketing may be genuine, but an nnpl (names now, plan later) approach is no substitute for a well thought out and market-tested strategy.

Arthur Hughes, in his next book, Strategic Database Marketing (Spring 1994 release) points out that two types of people are involved in the database marketing strategic planning process: constructors and creators.

Essential

‘The constructors are the mechanics,’ Hughes writes. ‘[The] creators are the ones who think up strategies to make customers feel recognized, appreciated and special. They find ways to exchange information with the company and its products. They find ways to build lifetime value.’

Creators, those individuals with a febrile marketing mind, are thus essential to the strategic development since they, in the main, produce the revenue needed to offset the costs associated with the program and leave something in the bank as evidence of the contribution made by database marketing.

Testing

In addition to the right people, there are two other factors that are central to a well-conceived database marketing strategy.

The first is testing.

The main purpose of testing is to mitigate risk, and, as such, its role in ‘selling’ a database marketing program (and, by implication, a database marketing strategy) to senior management cannot be underestimated.

Increasingly, marketers are being asked for ‘measurability’ in the programs that they run; importantly, senior managers understand that cost-per-thousand is not the true measure of a marketing campaign’s effectiveness, it is cost-per-sale.

(One measureable effect of database marketing programs is their ability to dramatically reduce the cost of sales, over the long term, by building lifetime customer value: if the ltv of the average customer is increased by 50% over a five-year period, and the cost of making these sales only increases by 20% in the same period, the cost of sales has been effectively reduced by the difference.)

In addition, though, testing provides the chance to respond quickly to a particular situation or to seek your customers’ response to a specific idea. Testing is the playground of creativity in database marketing.

Testing that uses the dm-proven ‘test versus control’ method (where a sample of the list receives an offer, and where a different matched sample does not) helps to answer the one question that is a perennial favorite at expenditure approval meetings: what happens if we do not do this?

Second, ‘the champion factor.’ Database marketing, particularly in companies that for decades have relied upon media advertising, sales promotion and trade allowances, represents uncharted waters.

Champion

For dbm to have a chance, it needs a ‘champion’ – that one individual who will call out its benefits, fight for an audience with the policy-makers, promote change in an atmosphere often opposed to it, mediate the internal turf wars and still have enthusiasm for a creative, new approach to an old problem that might be solved with the help of a marketing database.

Are there such people out there?

Well, I have heard about this individual at that competitor of yours…

- If you are looking for two solid days of learning about the art and science of database marketing, call the Division of Executive Development at York University in Toronto (416) 736-5079 and ask for the brochure on the upcoming Database Marketing seminar, Nov. 25-26 (and also March 17-18.)

The all-new seminar program features Arthur Hughes, and includes one full day on strategy development for database marketing programs.

David Foley is a marketing consultant and regular contributor to Strategy on database marketing issues. He is also an instructor in Database Marketing at York University. Strategy readers may reach him at (905) 940-8784; fax (905) 940-4785.