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Finish short answer questions in 1-2 pages. These are chapter1 and 2 from the book provided.
1. In the vignette about Keri Lee, how have databases benefited her
life? Are these benefits substantial or superficial?
2. What is a marketing database, and why are databases important to
marketers?
3. What are some of the trends that have led to the utilization of marketing databases?
4. How is database marketing different from aggregate marketing?
5. What are some of the advantages and disadvantages of database
marketing compared to traditional brick and mortar marketing?
6. What do you think about the concerns some consumers have about
database marketing? How would you respond to those concerns?

1. What is the primary purpose of a marketing database?
2. What is the difference between a customer database and other
types of marketing databases?
3. Why is it important to examine the marketing environment and
organizational resources before proceeding to develop a marketing
database?
4. How are database marketing strategies different from marketing
programs?
5. What advantages do databases provide to marketers for implementing marketing programs?
6. Provide an example of how tactical database implementation is
different from strategic database implementation.

Drozdenko-FM 2/26/02 6:02 PM Page v

Copyright © 2002 by Sage Publications, Inc.

All rights reserved. No part of this book may be reproduced or utilized in any form
or by any means, electronic or mechanical, including photocopying, recording, or
by any information storage and retrieval system, without permission in writing from
the publisher.

For information:

Sage Publications, Inc.
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E-mail: [email protected]

Sage Publications Ltd.
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United Kingdom

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Printed in the United States of America

Library of Congress Cataloging-in-Publication Data

Drozdenko, Ronald G.
Optimal database maketing: strategy, development, and data mining/
by Ronald G. Drozdenko and Perry D. Drake.

p. cm.
Includes bibliographical references and index.
ISBN 0-7619-2357-8
1. Database marketing. 2. Electronic commerce.
I. Drake, Perry D. II. Title.

HF5415.126 .D76 2002
658.8’4-dc20 2001005596

This book is printed on acid-free paper.

02 03 04 05 10 9 8 7 6 5 4 3 2 1

Acquisitions Editor: Marquita Flemming
Editorial Assistant: MaryAnn Vail
Production Editor: Claudia A. Hoffman
Indexer: Molly Hall
Cover Designer: Michelle Lee

Drozdenko-FM 2/26/02 6:02 PM Page vi

Contents

Preface xv
Supplemental Material xvii
Acknowledgments xix
Foreword xxi

1. Introduction to Database Marketing Concepts 1
What Is a Marketing Database? 3
Trends Leading to the Use of Databases in Marketing 4

Market Segmentation 5
Emphasis on Service and CRM 6
Changes in Media 7
Changes in Distribution Structure and Power 8
Lifestyle and Demographic Trends 9
Accountability for Marketing Actions 10
Integration of Business Functions 11
Technological Advances 11
More Informed Customers 12

Database Marketing Versus Aggregate Marketing 13
Advantages of Database Marketing 15
Disadvantages of Database Marketing 16

Cost Issues 16
Global Markets 17
Competition From Traditional Retailer 17
Negative Perceptions 18

Framework for This Book 18
Chapter Summary 19
Review Questions 19

2. Stategic Database Development in the Marketing
Planning Process 21
Computerized Databases 23
Customer Databases Versus Other Marketing Databases 24
The Need for Strategic Planning 25
Developing a Systematic Plan for Using Marketing

Databases 26

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The Marketing Planning Process and Database
Implementation 27

Situational Analysis 28
Establishing Marketing Objectives 29
Strategy Development 30
Strategy Development, Targeting, and Product

Positioning 32
Marketing Programs 33

Distribution 34
Promotion 34
Price 35
Product 35

Monitor and Control 36
Databases and the Planning Process 36
Chapter Summary 37
Review Questions 38

3. Defining Customer Data Requirements 39
Data Needs Determination 40
Fulfillment, Marketing, and Prospecting Databases 41
Data Residing on the Marketing Database 41

Internal or House Data 41
Fulfillment Data 43
Marketing Data 43
Customer Contact Data 44
External or Enhancement Data 45
Compiled List Data 45
Census Data 47
Modeled Data 49

Lists Versus Data 49
Applying and Using Enhancement Data 51
Chapter Summary 53
Review Questions 53

4. Database Maintenance and Coding 55
Standard Database Maintenance Routines 56

Deduping the Customer File 57
Householding the Customer File 58
Purging Old Customer Records 59
Changing Contact Information 59
Standardizing Addresses 61
Removing Names From Databases at Consumer Request 61
Identifying Customers With Match Coding 62
Merge/Purge Processing 64
Coding Source and Promotional Offers 65
Salting Files and Decoy Records 66
Identifying Credit Risks and Frauds 67
Field Updating Rules 67

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Reporting Summary/Aggregate-Level Information 68
Database Storage and Security 70
Database Maintenance Schedules 72
Some Technical Aspects of Database Maintenance 73
Chapter Summary 73
Review Questions 73

5. Basic Database Technology, Organizational
Considerations, and Database Planning 75

Computer Hardware and Software 77
Database Hardware 78

Midrange Computers 79
PCs 79
Hardware Decision Factors 80

Database Software 80
Database System Organization 83

Structured Databases 83
Relational Databases 85
Comparison of Structured and Relational Databases 85

Structured Query Language (SQL) and Data Analysis 85
Organizational Considerations in Technical Database Design 86
Outsourcing: The Process to Select a Database Provider 88
Phases of Database Development 91
Comments on Technological Development of the

Database 92
Chapter Summary 93
Review Questions 93

6. The Analysis Sample 95
How We Sample 96

Representative Samples 96
Random Samples 97

Sample Usage 97
Creation of the Analysis Sample 98
Methods of Saving Point-in-Time Sample Data 100
Analysis and Validation Samples 101
Application of Analysis Findings 101
Chapter Summary 101
Review Questions 102

7. Analyzing and Manipulating Customer Data 103
Getting to Know Your Data 104
The Analysis 105

Univariate Tabulations 106
Cross-Tabulations 111
Logic Counter Variables 113
Ratio Variables 116
Longitudinal Variables 117

Time Alignment of Key Events 119

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Reducing the Amount of Customer Data to
a Manageable Set via Correlation Analysis 120

Statistical Background—Correlation Analysis 123
Chapter Summary 127
Review Questions 128
Notes 128

8. Segmenting the Customer Database 129
Defining Your Segmentation Objective 130
Segmentation Schemes 134

Segmentation for Promotional Product Offerings 134
Corporate-Level Segmentation 134
Product Line-Specific Segmentation 135

Segmentation for Life-Stage Marketing and Research 136
Segmentation Techniques 138

Univariate and Cross-Tabulation Analysis 138
Formal RFM Analysis 145
CHAID Analysis 148
Factor and Cluster Analysis 153

Factor Analysis 153
Cluster Analysis 158

Issues to Consider Regarding Segmentation
Implementation 163

Promotional Intensity 163
Too Many Products 164
Cannibalism 164
Overgeneralization 165
Ethical and Public Policy Issues 165

Chapter Summary 166
Review Questions 166
Note 167

9. An Introduction to Simple Linear Regression Modeling 169
The Simple Linear Regression Model 170
The Coefficient of Determination 174
Statistical Background—Simple Linear Regression Analysis 176
Chapter Summary 179
Review Questions 179

10. Multiple Regression Modeling 181
Defining Your Marketing Objective 182
Preparing the Data to Build the Multiple

Regression Model 184
The Multiple Regression Model 187
Model Interpretation 187
Assumptions of the Model 192

Multicollinearity 192
Other Properties 193

A Note on Modeling Binary Response Data 193

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Regression Diagnostics 194
Examining the Model for Indications of

Multicollinearity 195
Examining the Model for Variable Significance 197

Multiple “Logistic” Regression Models 199
Sample Composition 200
Outside List Modeling Options 201

Response Models 202
Clone or Best Customer Models 202

Stepwise Regression Models 205
Neural Networks 206
Data Mining, Tools, and Software 207
Ensuring That Your Model Holds Up in Rollout 213
Chapter Summary 215
Review Questions 215
Notes 216

11. Gains Charts and Expected Profit Calculations 217
The Response Gains Chart 218
Options When Lacking Validation Samples 223

Historical Gains Falloff Chart 223
Bootstrapping 225

Expected Profit Calculations 226
Reconciling Gains 231
Chapter Summary 233
Review Questions 233

12. Strategic Reporting and Analysis 235
Key Active Customer Counts 236
List Vitality Customer Statistics 238
Key List Segment Counts and Statistics 238
Calculating LTV 239

LTV Methodologies 240
LTV Profiles 241
Actual and Aggregate LTV Calculations 243

Calculating the Discount Rate and NPV 244
Sample Types Used in LTV Calculations 247
Forecasting LTV 248

Impact Studies 248
Monitoring Promotional Intensity 249
Chapter Summary 250
Review Questions 250

13. Assessing Marketing Test Results 251
Confidence Interval Calculations 252

Confidence Interval Estimation for a Sample Mean 253
Confidence Interval Estimation for a Sample Proportion 256
Confidence Interval Estimation for the Difference

Between Two Sample Means 258

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Confidence Interval Estimation for the Difference
Between Two Sample Proportions 260

Setting the Confidence Level 263
Single Sample Measures 264
Difference Between Two Sample Measures 264
Making a Business Decision Based on the

Confidence Interval 266
Single Sample Measures 266
Difference Between Two Sample Measures 267

Hypothesis Tests for Significance 268
Establishing the Hypothesis 269
Setting the Error Rate of the Hypothesis Test 269
Establishing the Direction of the Hypothesis Test 270
Hypothesis Test for the Difference Between

Two SampleMeans 270
Hypothesis Test for the Difference Between

Two Sample Proportions 275
Setting the Confidence Level of

Hypothesis Tests for Significance 279
Making a Business Decision Based on

Hypothesis Tests for Significance 279
P Value of the Hypothesis Test for Significance 279
Conducting Hypothesis Tests for Significance

Using Confidence Intervals 280
Gross Versus Net 281
Multiple Comparisons 281
Calculating Breakeven 282

Response Rate Required to Break Even 283
Increase in Response Rate Required to Break Even 283

Facts Regarding Confidence Intervals and
Hypothesis Test Results 284

Marketing Test Analysis Software 285
Chapter Summary 285
Review Questions 286

14. Planning and Designing Marketing Tests 287
Marketing Test Design Considerations 288

Rule 1: For Mailers, Include the Control Package
in the Test Plan 288

Rule 2: Reverse Test Package Changes 288
Rule 3: Test One Change at a Time 289
Rule 4: Test for Only Meaningful

Package Element Interactions 290
Rule 5: Define the Universe for Testing Carefully 291
Outside List Test Design Considerations 292

Sample Size Considerations 294
Sample Size Determination for a Sample Mean 295
Sample Size Determination for a Sample Proportion 298

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Sample Size Determination for the
Difference Between Two Sample Proportions 301

Marketing Test Planning Software 304
Alternative Testing Approaches for

Small Direct Marketers 304
Chapter Summary 308
Review Questions 308

15. Marketing Databases and the Internet 309
Database Integration 310
Growth in Internet Commerce 312
The Internet Versus Other Database Marketing Media 314
Limitations of Internet Marketing 317
Personalization: The Great Promise of the Internet 319

E-Mail Marketing 321
E-Mail Applications 321
E-Mail Formats 322

Chapter Summary 324
Review Questions 325

16. Analyzing and Targeting Online Customers 327
Data Collected via the Internet 327

Registration Data 328
Behavior Data 330
Source Data 332

Understanding Internet Users and Online Buyers 332
Web Site Reporting 334
Driving Customers to Your Web Site 337
Targeting Online Customers 341
Conducting Marketing Tests in the

E-Commerce World 345
Banner Ads 345
E-Mail 347

Chapter Summary 348
Review Questions 348

17. Issues in the Marketing Environment and
Future Trends in Marketing Databases 349

The Global Business Environment 351
Social Concerns and Ethics in Database Marketing 357

Industry Organizations 360
Evolution and Trends in Database Marketing 362

Consumer Databases and the Internet 362
B-to-B Databases 364
Not-for-Profit Databases 364
Retailer Databases 365
Service Organization Databases 365

Chapter Summary 366
Review Questions 366

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Glossary 369
Additional Readings in Database and Direct Marketing 381
References 383
Name Index 387
Subject Index 389
About the Authors 397

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Preface ___________________________________________

xv

Contemporary direct marketing and e-commerce companies cannot existin today’s competitive environment without the use of marketing
databases. Databases allow marketers to reach customers and cultivate
relationships more effectively and efficiently. Although databases provide
a means to establish and enhance relationships, they can also be used
incorrectly, inefficiently, and unethically. Our goal in this book is to provide
the reader with a complete and solid understanding of how to properly
establish and use databases to help organizations maximize their relation-
ships with customers. In fact, we have not found any other book on the
market today that contains the level of detail regarding database marketing
applications that this one has.

We have been involved in the direct marketing industry and academia for
many years. Ron Drozdenko teaches Strategic Marketing Databases and
Interactive Marketing Management and has been a consultant to many firms
over the course of his career. He is currently the Chair of the Marketing
Department at Western Connecticut State University. Perry Drake is an inde-
pendent database marketing consultant and adjunct faculty member of New
York University, where he teaches Statistics for Direct Marketers, Database
Modeling, and Advanced Database Modeling in the Direct Marketing
Master’s Degree program.

In teaching such topics to students, we both have found little material to
draw upon. As such, we were required to create our own content from our
industry experience, help from peers, and published case studies. Several
excellent books have been written on the topic of direct marketing.
However, many of those books delve only into areas such as copywriting
and media selection and place less emphasis on database marketing appli-
cations from a marketer’s perspective. Our intent with this book is to focus
on the marketing database and take readers systematically through the
process of database strategy, development, and analysis.

We originally met each other in the summer of 1997 when we were
approached by the Direct Marketing Educational Foundation (DMEF) to
develop a database marketing course. The database course is one of a series

Drozdenko-FM 2/26/02 6:02 PM Page xv

of undergraduate courses in direct marketing the DMEF developed in col-
laboration with the Marketing Department of the Ancell School of Business
at Western Connecticut State University. (You can contact the DMEF to
obtain more information about these courses.)

Our target audience for this book is both students and practitioners:
upper-level undergraduates, graduate students in an MBA program, and
entry- and middle-level direct marketers. In addition, database analysts and
statisticians fairly new to the field of direct marketing will find the book
useful. It will provide a complete overview of the analytical applications in
the field of direct marketing. Direct marketing executives will also find the
strategic elements of the book helpful for business planning.

xvi OPTIMAL DATABASE MARKETING

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xvii

Supplemental Material

Academic adopters of this book have access to the following supportmaterial from the authors:
♦ A comprehensive collection of PowerPoint slides for each chapter
♦ Sample exercises and solutions for each chapter
♦ Sample syllabi and course organization
♦ Sample exams and quizzes
♦ Sample marketing databases for case study work given in various

formats (delimited text files, SAS, Excel, SPSS, etc.).

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xix

Acknowledgments

Anumber of people contributed directly or indirectly to the developmentof this book. Because the book evolved from an outline developed by
an advisory board established by the DMEF, the members of the board
deserve acknowledgment. In particular, Richard Montesi and Laurie Spar
were instrumental in establishing the board and organizing the meetings.
David Henneberry and Dante Cirilli worked with us to establish the origi-
nal outline that served as the basis for the database marketing course and
eventually this book. The extensive backgrounds of Dave and Dan in the
direct marketing industry ensure that the book’s foundation is solid.

We also wish to acknowledge the indirect contributions of a number of
small and large professional associations in the direct marketing community
that allowed us to examine database marketing in application. In particular,
The Reader’s Digest Association and Grolier Direct Marketing influenced
our perspectives on database marketing.

One of our primary reasons for writing this book is to provide market-
ing students with a good foundation in database strategy, development, and
analysis. Therefore, the feedback we obtained from our students at the
Ancell School of Business at Western Connecticut State University and New
York University was especially valuable in translating course materials into
a coherent book. Students also read drafts of sections of the book and
offered several cogent suggestions. In particular, Perry gives special thanks
to some of his past students at NYU—Joe Bello, Janelle Bowleg, Eric
Chism, Dean Krispin, Steve LaScala, and Bob Wiener—for their tremen-
dous efforts in ensuring that the book content was complete, consistent,
and understandable.

Industry reviewers of chapters of this book deserve our gratitude. In
particular, Perry personally thanks, first and foremost, Pierre Passavant,
the previous director of the NYU Direct Marketing Master’s Degree pro-
gram, for his support and the many opportunities he provided. Secondly, we
thank Gary Coles for his significant review of Chapter 10, Rich Lawsky
for his significant review of Chapter 4, and Elizabeth Colquhoun for her
review of all the chapters for clarity. In addition, we thank Craig Ceire,

Drozdenko-FM 2/26/02 6:02 PM Page xix

Mary-Elizabeth Eddlestone, Mary Halloran, Patrick Hanrahan, Jim Tucker,
Henry Weinberger, and Pat Zamora for their individual contributions deal-
ing with specific topics. We are also indebted to the following reviewers of
the completed manuscript. Their comments and suggestions have helped
improve the final version of the book.

Naomi Bernstein

Dante Cirilli

C. Samuel Craig

David Heneberry

Richard Hochhauser

Patrick E. Kenny

Brian Kurtz

Peter C. Mueller

Pierre Passavant

Kari Regan

Mary Lou Roberts

Thanks to the team at Sage Publications, including Marquita Flemming,
MaryAnn Vail, and our copy editor, Barbara Coster, for their support and
guidance.

Last, but certainly not least, our appreciation goes to our families. In
addition to lending moral support, some family members provided direct
contributions to the development of the book. Rita Drozdenko, Ron’s wife,
read several chapters and provided feedback from the perspective of a
novice to the field. Rhonda Knehans Drake, Perry’s wife and an accom-
plished database marketing consultant, made a significant contribution to
the book. Rhonda wrote Chapter 16, “Analyzing and Targeting Online
Customers,” and also provided professional critiques of other chapters.
Tarry Drake-Schaffner, Perry’s sister, an avid book reader and bookstore
owner, spent a tremendous amount of time editing and rewriting all the
technically oriented chapters. Words cannot express the thanks that Perry
has for her invaluable input in ensuring that complex topics could be under-
stood by a beginner. As a novice to the field herself, this was not an easy
task for Tarry, especially given the tight deadlines. Thank you, Tarry, for
your tremendous efforts.

—Ronald G. Drozdenko
—Perry D. Drake

xx OPTIMAL DATABASE MARKETING

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xxi

Foreword

With about 70 years of management and teaching experience betweenus, we know a superior training/reference book when we read it. This
is a great one. We aren’t surprised, because we both confer with the authors
about the database issues of our own seminars, classes, and clients.

If you have a database, chances are you have database questions and
issues: How good are the data? How complete? Are you capturing the right
data? Are you using the data to the maximum advantage? Will investments
in new system enhancements pay out? What steps must be followed when
considering to outsource your database? What issues must be considered
when examining data mining tools? How do you learn sound database
management practices? How do you teach them? How do you provide intel-
ligent leadership to database management departments that report to you?

The answers require a thoughtful examination of what is needed, how to
capture it, at what cost—and some knowledge of statistics that most of us
don’t have. You won’t find a better resource than this book. It covers all
aspects of database marketing, including database design, maintenance,
data usage, test design, and data analysis. In all these areas, the focus is on
how to best utilize the database to optimize marketing efforts. Important
current issues such as e-commerce, ethics, privacy, and globalization are
also covered.

Coauthor Ronald G. Drozdenko, Ph.D., Professor and Chair of the
Marketing Department at the Ancell School of Business, Western
Connecticut State University, teaches Strategic Marketing Databases and
Interactive/Direct Marketing Management. He was a member of the advis-
ory board established by the Direct Marketing Educational Foundation to
develop a model curriculum for direct/interactive marketing. This model
program is currently being offered at the Ancell School. In his role as fac-
ulty adviser for student interns, Ron uses company feedback to enrich the
program with continuing real-life applications. Ron has also accumulated
more than 20 years of applied marketing experience. Both his academic
and applied marketing backgrounds are reflected in the approach taken in
this book.

Drozdenko-FM 2/26/02 6:02 PM Page xxi

Coauthor Perry D. Drake is currently a database marketing consultant
and faculty member in the Master’s of Science in Direct Marketing program
at New York University. Prior to this, Perry had spent over 10 years in vari-
ous database marketing roles at The Reader’s Digest Association, most
recently as the director of a special division within the Marketing Services
group. During Perry’s first year at NYU, word got around that he had a
remarkable ability to make topics such as statistics and database modeling
and regression understandable and interesting. In recognition of his abil-
ities, he won the first Outstanding Master’s Faculty Award. Perry’s excep-
tional teaching skills are very evident in the chapters of this book.

The book that Ron and Perry have written tracks a character, Keri Lee,
as she resolves data and database issues at every step in her advancement
through the ranks, first in a technology agency servicing clients and later as
a senior manager in a large publishing company. Her reasoning and her
solutions to data problems of increasing complexity demonstrate the
methodology of database management in all its statistics-driven splendor.
Go as deeply as you need for your purpose. The practical wisdom and con-
crete examples make it an ideal resource for business managers, instructors,
trainers, and students.

If you are a business manager, this book will help you oversee the vari-
ous specialists you must work with to implement a database marketing
strategy. If you are an instructor, trainer, or student, it will give you a clear
picture of what actually happens in the real world of business and specific
techniques used by business professionals. Keep the book at hand to resolve
your next database dilemma.

—David Heneberry
Director, Direct Marketing Certificate Programs,

Ancell School of Business, Western Connecticut State University

—Pierre Passavant
Professor of Direct Marketing, Mercy College, Westchester, New York

xxii OPTIMAL DATABASE MARKETING

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Introduction to Database
Marketing Concepts

1

1
It’s 7:15 p.m., Keri Lee, a 29-year-old account executive for a technology
company, stops at a supermarket in Southbury, Connecticut, on her way
home from work. After picking up Diet Pepsi, a few tomatoes, lettuce, and
a package of Swiss cheese, she goes to the express checkout line. Keri hands
her store card to the clerk, who scans it prior to processing her order. Using
the store card allows her to get a discount on the cheese. With her sales
receipt, she also gets a $0.40 coupon for Ritz Crackers. The bill came to
$6.20. Keri paid with her VISA card.

Keri picks up her mail before going into the house. There are catalogs from
Bloomingdales, L. L. Bean, Macy’s, and Pottery Barn. She puts the Pottery
Barn catalog to the side. Her sister’s birthday is in two weeks and the items
in the catalog are consistent with her sister’s decorating style.

In addition to the electric and VISA bills, she has a letter from the
Volkswagen dealership thanking her for her recent purchase and a letter
from the American Red Cross. Remembering that the Red Cross recently
helped her friend who was caught in a flood, she makes a contribution by
checking a box and entering her VISA number.

Keri also got the new issues of Smart Business, Business Week, and Self
magazines. An ad in Business Week about a technology conference attracts
her attention, and she fills out an attached response card requesting more
information.

After dinner, she receives a phone call from an insurance company. At first,
she is irritated by the call. She then remembers that her car insurance rates
increased substantially since she leased her new Volkswagen and asks the
person on the phone for a quote. Later that evening, she goes on the Internet
to look for other insurance companies and requests three more quotes online.

Drozdenko01 2/26/02 6:03 PM Page 1

2 OPTIMAL DATABASE MARKETING

Browsing the Web, she remembers that she has almost finished the book
she has been reading and goes to Amazon.com. The Amazon page provides
her with suggestions based on her previous purchase, A Certain Justice, by
P. D. James. A new mystery by Elizabeth George is on the suggestion list.
It can be shipped within 24 hours. Keri places the book into the Shopping
Cart and uses 1-Click to check out.

Before leaving the Amazon site, she clicks on the Music tab and searches for
Sarah McLachlan. She heard a new single by McLachlan on the radio and
was curious about the other songs on the CD. Keri listens to five cuts from
McLachlan’s new CD but decides not to order yet.

At 10:00 p.m., she scans through the channels on TV and pauses at QVC
when a bracelet grabs her attention. Calling QVC, she gives her account
number that she used 2 months ago when she purchased a color printer. In
less than 1 minute, the bracelet is ordered and she returns to scanning the
channels.

Keri’s daily routine is similar to the routines of millions of other peoplein the United States and other countries. These transactions provide us
with the goods and services that are a part of our lives. In the scenario
above, databases underlie all the transactions that Keri made. They underlie
the purchases in the grocery store, catalogs, TV shopping, Internet, tele-
marketing, and the charitable contributions. Databases are a collection of
information related to a particular subject or purpose that are usually
maintained on a computer for easy search, retrieval, and analysis. Although
databases are not new, they are becoming an essential element of marketing.
Organizations in consumer products, business-to-business (b-to-b), char-
ities, health care, politics, media, investments, government, insurance, and
so on are finding marketing databases essential to their survival and
success. In addition, because technology has become more accessible, small
businesses are finding the use of databases a cost-effective way to stay in
touch with their customers.

Several changes in the business, social, and technological environments
have led to the widespread use of databases in marketing. However, the
one underlying reason for the adoption of databases is that they allow
marketers to use information about individual customers to reach those
customers and cultivate relationships more effectively and efficiently.

Databases provide a means to establish and enhance relationships,
but they can also be used incorrectly, inefficiently, and unethically. Organ-
izations can use databases to help customers make shopping easier and
make better purchase decisions, or they can use databases to intrude into
people’s lives. Good marketers know that maintaining customer satisfac-
tion is the key to long-term success, and using a database to flood people

Drozdenko01 2/26/02 6:03 PM Page 2

with unwanted promotional materials is not only wasteful but is unlikely
to build productive long-term relationships with customers. One of the
goals of this book is to look beyond the temptation of the quick sale and
consider the long-term impact of database marketing techniques on the
organization, customers, prospective customers, and society in general.

This first chapter introduces marketing database concepts. We begin by
defining marketing databases and examining the environmental trends
that help to explain why the use of marketing databases is growing so
rapidly. Because one of the principal uses of marketing databases is in
direct/interactive marketing, we examine this type of marketing, compare
it to marketing through conventional retail channels, and briefly explore
its advantages and disadvantages. We conclude the chapter by providing
a framework for the concepts and techniques covered in this book.

Introduction to Concepts 3

___________________________ What Is a Marketing Database?

A marketing database is a file containing information about individual
customers or potential customers that is relevant to the marketing process.
This file can be simple or sophisticated. For centuries, businesspeople
recorded customer information on slips of paper or in notebooks. …

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