At BlueVenn, we’re quick to promote the benefits of database marketing. That’s not to say we’re oblivious to the challenges that come with it. Thankfully, when weighing up the pros and cons of database marketing, being aware of the pitfalls means you can avoid some of them.
Here are five challenges of database marketing…
Setting up can be costly
While costs depend on your market and the scale of your operations, if you have yet to do any form of database marketing, or have grown beyond lists on spreadsheets or in an email tool, then it needs an investment in technology.
For example, you may want to better analyze and use your customer data. One option could be using a CRM (to collect information about known customers and their transactions). Or, a Customer Data Platform (to collect the data from all your online and offline channels, sit it in one place, and make it actionable with marketing automation tools). Or, you may see the benefit of both.
If not this, then you may wish to hand your data to a third-party marketing services provider. This, too, comes with costs.
More from our blog: Why You Should Leave Your MSP and Buy a Customer Data Platform
Although it will initially be cheaper than managing data in-house, there is the disadvantage of the time it takes for agencies to analyze the data for you. This is important if you're in a business where you want to turn around campaigns in hours rather than days.
However, if you opt for the Customer Data Platform option, performing the analysis yourself could reveal cost savings or efficiencies that quickly justify the investment cost.
Campaigns creatives require skills and resources
Collecting, accessing and segmenting customer data to create targeted lists for an email or mailshot is one thing. Data analysis is a skill in itself. But do you also have the resources to make the campaign creative? Or, an email service that lets you build attention-grabbing message templates?
A stand out email needs both powerful copy and a strong design. If you do not have the appropriate skills or tools in-house, then you may have to look into outsourcing.
Even though email is old-fashioned compared to other digital marketing channels, a 2017 DMA benchmark report shows that email still has the lowest cost-per-acquisition of any media type. Similarly, one marketing agency found that email remains the top lead- and revenue-producing vehicle for B2B marketers in the US.
Want to know more? Download the ‘Marketer’s Guide to Customer Data Platforms’ eBook
You need to have quality data
We sound like a broken record, but data quality is critical for effective database marketing.
Customer and prospect data that is duplicated, inaccurate, out-of-date or 'dirty' will skew analytics and customer segmentation efforts. It means that your messages do not even reach the correct person in the first place.
Other effects of poor quality data can be far-reaching, and costly.
For starters, failure to communicate with existing clients and customers can lead to lost revenue. BlueVenn’s sister company (and data quality experts) Blue Sheep, for example, worked with a utilities client with many inaccurate contact records. This included a single contract worth millions of dollars.
It can also lead to wasted marketing efforts, such as sending emails and catalogs to the wrong person, wrong address, or sending multiple communications to the same person. Not to mention leading your marketing team to make poor decisions based on poor data, and how badly targeted messages can lead to bad customer experiences.
To resolve this, a Single Customer View database, which matches, merges, cleanses and enhances customer data to ensure your records are correct, is considered a desirable solution.
You need to be segmenting your data
You might think it goes without saying, yet BlueVenn’s Myths of Marketing survey found that 16% of marketers are still unable to segment their customers effectively.
If you aren’t segmenting your customer database, you’re effectively using the old ‘pay and spray’ approach – blasting out the same message to everybody in your database in the hope that quantity makes up for the quality.
The real strength of database marketing ensuring that the correct communication goes to the right person, with a message that is relevant based on their demographics, buying history or location. The UK DMA found that segmented and targeted emails generate 58% of all of a business’s revenue.
More from our blog: The Importance of Customer Segmentation
You must consider data protection laws
On May 25, 2018, all countries in the European Union (and the UK, pre- and post-Brexit) will need to adhere to the General Data Protection Regulation. In other countries, organizations that handle the data of EU/UK citizens will also have to play by the same rules.
Privacy laws relating to the use of personal data for marketing already exist. But stringent new requirements and the threat of huge fines for transgression has required marketers to take a closer look at their approach to direct marketing.
In particular, businesses with a database marketing strategy need to ensure that they can demonstrate the appropriate, consent to send communications, with granular marketing preferences made clear. This applies to new and existing customers.
For individuals to agree to your marketing messages, organizations will have to make it clearer than ever what the benefit is to them. They need to know the trade-off for giving you their details.
Still, with it harder to obtain the appropriate consent, it means that those in your database are much more interested in your products or services. So theoretically, more valuable to you than those do not wish to receive your marketing.
If you want to learn how BlueVenn's marketing tools can help you collect, analyze and use your customer data in the most efficient and effective ways possible, why not book a demo or register for one of our regular live software presentations?