Database marketing gathers valuable customer information to create a personalized message promoting a company’s product or service. Databases contain valuable customer details, including contact information, purchase history and communication preferences. Marketers can use any medium to reach customers with targeted messages, such as email, text messaging or direct mail campaigns.
Create Targeted Marketing Strategies
Databases allow companies to capture pertinent customer data, including geographic location, gender, age, education level, household income and interests. Having this information allows businesses to better understand their target market. The data can be used to craft marketing strategies that better align with customer needs and wants as a whole, and it can be segmented out into different user groups.
Excludes New Customers
Database marketing limits companies to existing customers, as they can only reach those who have previously submitted their contact information. This makes it difficult to generate new business, as companies are only able to target the same people. It can be challenging for a company to grow when it doesn't have a way to connect with new prospects.
Build Better Loyalty Programs
Tracking key customer data allows companies to shape loyalty programs to meet the needs of top customers. Capturing pertinent information makes it possible to identify trends that can be used to make loyalty programs more profitable. When companies know what motivates high-yield customers to spend, it’s much easier to build a cost-effective loyalty program that produces desired results.
High Maintenance Costs
A database can be expensive to maintain. Companies have the option of using a database provided by a third party or building one internally. Third-party platforms can be the easier option for an organization that lacks the necessary technology resources to devote to building and maintaining a database, but they can be associated with high startup fees and pricey monthly maintenance costs. If an organization opts to build a database internally, it will have to purchase database software and hire someone to manage it.
Improve Personalized Experience
Gathering customer data allows companies to create a more personalized shopping experience. A business can segment users into groups and send them targeted emails to entice them to buy specific products. A customized browsing experience can also be created for customers on the company website based on data mining.