When every marketing dollar counts, you can’t afford to cast your line in the ocean and wait for a bite. With database marketing, you can lure your best prospects and customers into your own private pond (database) and reel them in at your leisure using the most cost-effective database marketing techniques.
What makes “database marketing” so effective?
With database marketing, you’re marketing only to those with an express interest in your product or service. Obviously, it is far more economical to communicate with an existing customer or prospect than to continually identify and communicate with new ones (what’s known online as “cold traffic”).
Database marketing is also impact-effective, because you can customize your communications to the information you have on file about these prospects and customers.
Database marketing resources include everything from paper leads in a shoebox to email and direct mail “house” lists of prospects and customers, social media followings, and even leads and customers you’re tracking in your CRM (customer relationship management). This collective data represents an invaluable resource of marketing information.
Many of the ideas in this book are based on database marketing or can be made far more effective with a good database marketing system. Because properly used, database marketing can enable you to:
- Convert prospects into customers
- Thank or reward purchasers
- Reactivate inactive customers
- Encourage more frequent purchase through cross-sell and up-sell
- Customize and personalize your marketing communications
- Better understand exactly who your customers and prospects are
- Better understand your audience’s needs and purchasing habits
- Precisely test and measure the results of your marketing efforts
- Identify your best prospects and customers
- Make more informed marketing decisions
- Keep your marketing efforts from your competitors
Who Uses Database Marketing?
Database marketing is not just for online marketing companies or information publishers. Just about every business, online or off, uses database marketing in some form or another to keep track of—and communicate with—prospects and customers.
Here are just a few examples of companies that have turned database marketing into a powerful marketing tool.
- Packaged-goods companies, such as coffee manufacturers, amass huge databases of all coffee users, along with their current preferences. They can then market to their own customers or use coupons to encourage those using the competition’s products to switch.
- The Alaska Division of Tourism doesn’t try to sell you on Alaska in their ads. They try to lure you into their database by selling you on their free publication: “Free Advice for Anyone Ready to Discover Alaska.” Then, when they have identified you as a prospect, they market to you themselves and also provide your name to cruise lines and resorts who send out even more material.
- Amazon shows suggested and similar products throughout the user experience. The suggestions come from the person’s browsing history and other data informed by their machine-learning algorithm. Amazon is also taking advantage of another well-known direct response principle—offering people the opportunity to buy something right after they just bought something else. In this way, Amazon capitalizes on the consumer’s “buying frenzy” taking place.
What Kind of Information Should You Collect?
Collect any information you might find useful in communicating with your prospects or making marketing decisions about how to market to them. Naturally, this will be different for different types of businesses (for example, a toy retailer might be interested in the number of children you have, whereas a liquor store might not).
Such information might include:
- Name, address, telephone number(s)
- Gender
- Age
- Income
- Housing (own or rent, price range)
- Marital status
- Number of children
- Purchase history
- Inquiry history
- Recontact date
- Needs, purchase requirements, etc.
- Status (where in sales process)
- Contact history: in person, telephone and email
Treat your database like gold, because it is.
Not only is it priceless to you for the business that can be generated from it, but others may be willing to pay dearly for the privilege of selling to your database with affiliate offers. You can rent your database list to other businesses who would be interested in marketing to your prospects and customers, too, if your list becomes large enough (5,000 buyers or more), and a list broker might be interested in handling your “list management” for you.
How to Build a Database
Do everything you can to get the names, email, home addresses and phone numbers of your prospects and customers, as well as any information you can about what specific products or services they’re interested in.
In addition, try to get any other information about them which is relevant to your business. In some businesses, such as business-to-business or large-ticket items, getting information about prospects and customers is a matter of course. In other businesses, such as a high-traffic retail outlet, getting such information is more difficult.
However, every business should do everything they can to get those names. Whenever someone calls on the phone or inquires about a product or service, every effort should be made to get that person’s name, address, phone number, product interest and any other relevant information. Considering how valuable such information is, it’s surprising how many people still neglect to get this information into their database.
If you have a retail outlet, one sorely overlooked technique is to simply ask people for their email address and phone number. You’ll be surprised how readily they’ll give it to you if you just request it. Other techniques you can use are any kind of sweepstakes or drawing that requires people to leave the information in order to register or leave their business cards, or you can simply offer a free on-the-spot gift or discount for giving the information.
To build your database, all your communications to prospects and customers should have some sort of response mechanism that requires them to identify themselves to you: a coupon to send in, an email address to reply to, or a phone number to call.
Encourage them to utilize the response mechanism by offering a discount, a free gift or valuable information in the form of a downloadable report, a webinar or a video sales letter.
Consider forming some sort of frequent-buyers club. This is a great way to identify your best customers, reward them, and encourage them to keep buying from you. You can also get names of prospects by purchasing names from other companies who do business with the same type of markets as you do or from list brokers who can offer you lists based on virtually any criteria you like, including geography, income, or the purchase of products or services like your own.
What to Do with ‘Em Once You’ve Got ‘Em
Once you’ve got these names, the profit really begins.
Follow up on your prospects as often as appropriate with mailings and phone calls. Don’t give up after one or two tries either. Tests show that response often does not diminish significantly with successive mailings. In fact, often the same piece can be mailed again with substantially the same results. Why? How carefully do you read your mail? How often do you throw things out if you’re too busy that particular day?
For customers, the first thing you should do is thank them for doing business with you, even if the letter to thank them costs you more than the profit you made on the sale. They’ll more than make it up to you in future business.
Step two is: try to sell them something else. The biggest mistake virtually every business makes is failing to keep in touch with their customers often enough. These are people who have already bought from you. They have been hopefully satisfied with your product or service. They’ve found someone they can trust to do business with. They want to do business with you again! Just give them the chance. Call them. Write them. Go visit them. Offer them special “good customer” discounts, gifts or information. Contact your customers and give them the opportunity to do business with you again at minimum every six weeks.
After you’ve taken care of your prospects and customers, use database marketing to reactivate inactive customers. You’ll be surprised how often all someone needs is a letter, an email, or a phone contact that tells them, “You’ve been missed.”
Of course, today artificial intelligence gives you more opportunity and firepower than ever to leverage database contacts. It can tell you not just whom to contact but when and how to do so for the best results.
For example, AI can:
- Analyze and then predict purchase patterns
- Personalize email content and subject lines at scale
- Identify customers most likely to respond to upsells or cross-sells
- Prioritize which leads to act on immediately
- Monitor interactions and alert someone when human intervention is required
- Adjust based on how an individual responds to different messages
The Endless Loop
Each interaction—whether a response or purchase—provides invaluable data to refine your future marketing efforts, as customers and prospects reveal crucial insights about themselves, as well as when, how, and why they respond.
Use their responses to update your database and make your mailings, telemarketing and sales presentations even more targeted to their needs. You can do this in two ways.
First, you can segment your database and communicate differently with different groups. This gives you the chance to address their general needs. It customizes your communications more and makes people feel you are sensitive to who they are.
One might say:
- “As a long-time user of our products, your confidence in our services is greatly appreciated…”
- “As someone who is probably thinking about retirement…”
- “As a boat owner, you’ll want to know about our full line of boat care products…”
- “Someone in your income bracket probably gets solicitations for this type of product all the time. But ours is different and here’s why…”
You can also customize your communications to that particular individual. For example:
- “Mr. Jones, thank you for purchasing an Acme Widget last Tuesday. You might also like to know about our line of custom widgets…”
- “You’ve been one of our top customers this year, and I just wanted to let you know how much your support is appreciated.”
- “Since you recently purchased our Super Widget #37, I wanted to be sure you got the inside scoop on our widget service department…”
What You’ll Learn
When you start down your own path of database marketing (or even just take a deeper dive into the data you’re already collecting), you’ll find yourself with an incredible amount of information you can use to fine-tune your marketing strategy.
First, look at your database and see what it tells you about your prospects and customers. Get a feeling for who they are. Look for any similarities or ways of grouping your customers and prospects you may not have previously noticed.
Once you’ve looked at your customers, go a step further and create customer personas—general categories or archetypes your customers broadly fall under. Sure, there will be individuals who fall outside these categories. But creating these persona profiles will help you keep your audience, their characteristics, their needs, and their relationship to your product or service front of mind when you’re creating marketing content and campaigns. And that’s the first step to writing customer-centric copy that keeps your messaging attention-getting, relevant and compelling.
In addition, because database marketing is response oriented, you’ll know not just how many responded to your marketing efforts but exactly where and from what types of customers or prospects those responses came. You’ll know if the responses varied by geography, sex, previous purchase history, or any other variable. You’ll know which communications channels are working better than others, and you’ll be able to concentrate on those prospects and communications that give you the best response.
In addition, database marketing may enable you to increase your response rates by re-matching your current efforts. For example, you may find that one media, a specific communication format, or a specific message works better with one type of prospect, while another media or type of communication or message works better with another.
Doin’ the Two-Step
One of the best examples of using database marketing to generate customers is the “two-step.” And no, I’m not referring to a dance.
The two-step is an application of database marketing where instead of trying to sell your product or service directly through your advertising, you offer more information. Two-step works because people don’t like to commit themselves too quickly. They may not pick up the phone and order your product, but they may pick up the phone for a free report. So you need to first lure the fish into your barrel so you can take careful aim. (This strategy of offering information first to position yourself or your company as a thought leader in a specific industry or on a specific topic is often referred to as “content marketing.”)
Two-stepping is also flexible. You might run a low cost ad on Facebook or develop a search engine marketing (SEM) strategy with Google Ads or Bing to solicit an initial response from a prospect. This is more cost effective than just running larger ads, because you will be able to target who sees your ads as specifically as you want to, which should in turn attract more qualified prospects.
Plus, you will also be able to use analytics from your ads to track and measure many key marketing variables, such as where your prospects came from, what they were looking for when they came across your information, and your cost of customer acquisition. Plus, you can test two-step ads by running them across different media, such as newspapers, magazines, and other online webpages through different display networks.
Follow-up is also cost effective because you’re responding to only those people who have expressed an interest in your product or service. In essence, you’ve gotten them to raise their hands and identify themselves to you. You can send them a detailed, more personalized sales message instead of depending on costly, mass-media advertising, which cannot be as detailed.
You might even run an ad that tells people to call or email you for a free report. The free report would include a hard-hitting sales letter selling your product or service, asking them to call for an appointment, or whatever action you would like your them to take. This may seem like a lot of trouble to go through, but testing has shown me over and over again that, ultimately, the end result is worth it.
If you’re a retailer, offer a free report on some aspect of your business (“Amazing free report reveals how to save money on dry cleaning”). Consumers then send for the report, giving you an opportunity to:
- Many bookstores use reader clubs to create a customer database, sell additional products to that database via catalogs, and reward frequent buyers.
- Many businesses, like grocery stores, use mobile apps and digital platforms to gather customer data, send personalized offers, and reward frequent shoppers. With targeted push notifications or exclusive discounts, they keep customers engaged and drive repeat purchases.
- Publications send their subscribers loyalty discount cards good for discounts from the businesses that advertise in these newspapers. So, at the same time they’re rewarding their readers, they’re directing business to their advertisers. Publications report increases in advertising contracts and subscriptions.
For Advanced Marketers Only: The Three-Step
If you really want to reel in a customer slowly but surely, try a three-step. It works on the principle that it is sometimes more cost effective to get the customer to get to know and trust you more gradually. Here’s a three-step strategy I often use.
First, promote a free webinar using Google Ads. On the free webinar, offer a premium bonus or incentive if they stay until the end of the presentation. At the end of the webinar, make them an irresistible offer and give them an extra incentive, perhaps through a discounted rate, in order to get them to place an order with you.
Join the Club
One of the best ways to build lasting relationships with your best customers is through digital loyalty programs or subscription-based rewards. The classic example of this has been the airline frequent-flier clubs, which reward their best customers with free trips, upgrades, and other perks.
Here’s how a wide range of marketers have profited from getting their customers to join the club:
- Many bookstores use reader clubs to create a customer database, sell additional products to that database via catalogs, and reward frequent buyers.
- Many businesses, like grocery stores, use mobile apps and digital platforms to gather customer data, send personalized offers, and reward frequent shoppers. With targeted push notifications or exclusive discounts, they keep customers engaged and drive repeat purchases.
- Publications send their subscribers loyalty discount cards good for discounts from the businesses that advertise in these newspapers. So, at the same time they’re rewarding their readers, they’re directing business to their advertisers. Publications report increases in advertising contracts and subscriptions.
- Major credit card companies have built on this model, creating vast rewards ecosystems where customers earn and redeem points across hotels, airlines, restaurants, and retailers.
Apple’s Self-Expanding Database
Apple users tend to be passionate about their devices. One of the ways that Apple creates a self-expanding customer database is through exclusive features like iMessage and FaceTime, which work seamlessly between Apple devices while encouraging friends and family to join the Apple “network”—essentially turning every Apple user into a valuable database marketing asset.
This approach shows how modern database marketing has evolved. Rather than just collecting customer data, Apple creates value that makes users want to share their data. Through the App Store, they track purchases and preferences, but they’ve made privacy a key selling point. Their “on-device” processing and opt-in requirements have turned potential privacy concerns into a trust advantage, proving that strong database marketing can coexist with strong privacy protection.
The result? A customer database that grows itself while maintaining customer loyalty.
Marketing Is No Longer a One-Way Street
Database marketing is becoming more and more popular because, as opposed to the one-way dialogue of traditional advertising, it offers marketers an opportunity to carry on a dialogue with prospects and customers. They can then use the results of that dialogue to make subsequent communications more targeted, personalized and effective than ever.
If you’re a member of any frequent-flier or frequent-buyer clubs, if you’ve ever gotten a letter thanking you for your business, and if you’ve ever responded to an offer of more information about a product or service, you’ve experienced database marketing.
Now it’s time to make database marketing your secret weapon. Keep on the lookout for new ways to collect, analyze, and apply data on your prospects and customers. Once you get used to the precision of database marketing (some say it’s like “shooting fish in a barrel”), you’ll never want to go back to the cold, imprecise way of hunting for prospects again!
NOTE: Be sure to keep up on increasingly stringent data privacy regulations (for example, GDPR in Europe and CCPA/CPRA in California).
Probe Questions
- What information about my prospects and customers would I ideally like to maintain?
- How can I collect and keep the names of my prospects and customers? (And what cybersecurity measures do I need to put in place to safeguard their information and comply with any applicable regulations?)
- How can I follow up with prospects more often? And what is the right cadence?
- What else can I offer my present customers?
- How can I entice customers to buy more often with database marketing techniques?
- What does my customer data tell me about the needs, wants, and relationship to my product or service my customers have?
- How can I use the feedback I get to make future promotions even more personal and targeted?
- Can I utilize the two-step in my marketing efforts instead of trying to sell on the first encounter?
- Can I create a club of loyal customers to reward and keep in touch with them?
Million Dollar Resources
Optimal Database Marketing: Strategy, Development, and Data Mining, Ron Drozdenko and Perry Drake (2024) – Thorough introduction to technical and statistical aspects of database marketing
Customer Data Analytics: Theory and Practice for Marketing Analytics in the Digital Era, Mike Chen-Ho Chao (2023) – Comprehensive coverage of modern database marketing principles
CRM and AI for Customer Experience: A Practical Guide, by Raj Venkatesan and Jim Lecinski (2023) – How AI is transforming customer relationship management
The Customer Experience Book: How to Leverage Data and AI to Win and Keep Customers, Alan Pennington (2023) – Modern approach to database marketing in the AI era
Data-Driven Marketing: Using Analytics and Metrics to Drive Strategy, Mark Jeffery (2023) – Practical guide to leveraging data for marketing decisions
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