Database marketing, direct marketing, and customer relationship management all overlap strongly with each other. The major and only difference between database marketing and the other two is that database marketing as the name suggest has a high reliance on the use of databases in marketing.
Customer Relationship Management
CRM’s main focus is on enhancing customer relationships. While this definition can also be applied to database marketing, there is one thing that needs to be taken into account. Companies large and small can improve their relationship with customers, in other words, implement CRM, without using data.
Take a small and local coffee house as an example. The barista has several interactions with some customers and this enables him to get to know them. He may start using their first name or memorize their preferences. These things will help the barista to improve his relationship with the customers while he has not used any database or even smart device.
This is, however, not possible for a large enterprise. There are a large number of customers and a large number of salespeople. A human mind is not capable of remembering this amount of data and hence we need to rely on a computerized process to help us improve our relationship with our customers.
The main focus of direct marketing is personalization. Marketers use direct marketing to alter the way they communicate with their customers. In order to fully execute direct marketing, you do not need to integrate big software systems. Very basic software such as Microsoft Excel will do the work for you.
You can make a purchase list for your customers. Include their name, their contact point, and the list of the products they have purchased from you. Then based on their purchases send them relevant offers.
Suppose that one of your customers has recently bought a photocopying machine from you. You can send them offers of cartridges or paper. This is what direct marketing is in essence. But sometimes to fully customize your offering you may need some complex algorithms than relying on common sense.
One such algorithm is collaborative filtering whereby the system identifies similarities among customers based on their behavioral data. Once these similarities have been spotted and customers have been clustered based on affinity, you can predict what each customer may like or dislike. This algorithm is used extensively in services such as IMDB, Good Reads, Amazon, and the like. The implementation of such algorithms is almost impossible through Microsoft excel.
To Sum Up
CRM Marketing, direct marketing, and database marketing highly overlap but there are some differences among them. CRM marketing has a focus on improving the relationship with customers. Direct marketing is a technique in which marketers try to customize their communication and offerings for customers based on their characteristics. Database marketing involves both of the above-mentioned techniques but it has a high reliance on data analysis techniques and the use of algorithms to predict customer’s behavior.